How To Spend Unexpected Income: 3 Questions To Ask

For anyone working a budget, receiving financial gifts can be a difficult problem – what should one do with the extra cash? This unexpected income can be a burden when it comes to sitting down with your spouse and deciding where it should go. Whether it’s a gift or a one time payment for a side job, here are the top three questions I ask myself when deciding where to put the money.

Standard Mode: What to do when there’s no imminent financial threat.

Question 1: What was the intention of the giver?

This is perhaps the most important question to ask yourself. Honor the intended purpose for the money you are given. If you’re struggling with where to spend the money, ask for another person’s input. Sometimes our own desires can get in the way of the intended purpose. Don’t let this happen to you!

Let’s say someone slips you a five-dollar bill at work for a job well done and says, “Buy yourself a coffee, thanks for your help.” Obviously, the giver’s intention is that you spend that money on something enjoyable; something discretionary. By all means, have fun! You deserve a reward for providing excellent customer service. If the intention of the giver is unknown, move to the second question.

Question 2: What is your main financial goal at this time?

Unintended income is next best served going toward your main financial goal. That could mean putting it toward debt, an emergency fund, investments, your child’s education, etc. Whatever your main focus is, throw it at that! There’s nothing like getting a financial boost from unexpected income. Doing this will help you achieve your ultimate financial purpose.

If you don’t have a main financial goal, it’s time to get one! A good place to start is with Dave Ramsey’s 7 Baby Steps. This will help you determine what the most important area of your finances is and show you how to get started.

Question 3: Is this an opportunity for extravagant giving?

For those of you who have extra money to spare and have already built a strong financial foundation, try giving your money away! There are so many benefits to giving. Here are a few:

  • Giving puts money in perspective and allows humility to reign.
  • Giving helps the receiver in a time of need.
  • Giving can create a tax deduction while you’re giving to charity!

Overall, it just makes you feel good inside to give. Giving to others can radically change your life. If you don’t have a need for the unexpected income, share it with others!

Emergency Mode: What to do when there’s an imminent threat.

There are those times in life where we must take every cent of income and purpose it for survival. If you’re expecting a large financial emergency around the bend, now is certainly not the time to give away your extra income!

But what if the money was purposed by the giver to go toward something you know it shouldn’t? Let’s say your grandfather gives you $1,000 and says, “Take a vacation, you need to get away!” Would it be wise to take that vacation when you can hardly feed your family? Certainly not! We must take care of our households first and foremost. Sit down with the giver and explain that this money would be better served by helping pay the bills. If their intentions are good, they’ll understand.

Be Intentional With Your Extra Cash

The key to all of this is intentionality. Some people find a crisp, high-dollar bill laying on the ground and immediately waste it away without giving thought to what they’re doing. Adhere to a higher standard! Give thought to your actions. You’ll save more money and help more people in the long run.

So, how do you spend your extra unexpected income? Let us know in the comments!

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  1. Freedom Journey

    This post is very timely for me as I was just pondering this question! Our budget is very tight and when we get a bit extra (from a paycheck at least) we automatically want to spend it to do things we won’t otherwise…dinner, a movie, etc. But that certainly doesn’t help us reach our goals. Yet I really love seeing a movie. It’s hard.

  2. John Ferris

    This post is making me think of all the times I have gotten extra unexpected income, and have wasted it on unneeded things. I can’t change the past, all I can do is heed your advice and be “intentional” with it. Our main goal right now is baby step #1 from Dave Ramsey’s “Baby Steps”. So, we need to apply any extra funds to our $1000 emergency fund. Thanks for the post.

  3. Great thoughts guys! It truly is difficult to take extra money and intention it for good. I’m glad this was a good reminder for you! I know I need all the reminders I can get!